Employee retention is smart cash flow strategy

Retaining good employees is a smart way to manage cash flow.

A quality retention program reduces expenses and keeps productivity high, says Jeff Stinson, president of Irvine, California-based Global Human Resources Outsourcing (GHRO).

He mentioned a GHRO client with 1,000 employees discovered that every 1 percent drop in turnover saved nearly $ 188,000 annually.

Stinson says one employee departure causes a drop in productivity, takes up the supervisor's time, creates a need to pay out unused vacation time and then creates costs related to the hiring for an open position.

He says an employee retention program should have the following:

• New hire orientation


• Strong performance management systems


• Up to date and fair employee policies


• Fair compensation and benefit programs


• Employee opinion surveys


• Quality supervisor/management training program

Stinson says a human resources audit can provide the framework for developing a strong employee retention program.

Improve cash flow using a Professional Employer Organization

Companies can improve cash flow by using specialists for tasks like human resources outsourcing which is one of the tasks of a Professional Employer Organization (PEO).

There are several strategic reasons to use a PEO:

• PEOs know HR laws and the latest employee-related regulations
• PEOs can steamline a HR workload for the busy owner or manager who wears many different hats in a small company
• PEOs can reduce employment costs and lower insurance premiums
• PEOs can offer solutions on Worker’s Compensation
• PEOs can offer input on one specialty area such as retirement plans or health plans

If you’re considering the type of PEO to use, check their credentials with industry trade associations such as NAPEO, the National Association of Professional Employer Organizations, the largest nationwide trade association for professional employer organizations. The organization has about 400 PEO members in all 50 states.

If interviewing potential PEOs, ask them what clients they've had, how they operate and how much money they have saved companies.

Using a PEO can free up the tasks facing a busy owner or manager of a company even a company that has as few as 15 employees.

Most PEOs will usually give a no-cost assessment on how they'll move forward and how they'll improve efficiency. One PEO rep told me, "guess how much it would cost a company to fight a lawsuit they could have otherwise avoided" or reduced insurance expenses.